It having been settled by previous decisions of this Court that
where a corporation of one state brings into another state, to use
and employ, a portion of its movable property, it is legitimate for
the latter state to impose upon such property thus used and
employed its fair share of the burdens of taxation imposed upon
similar property used in like way by its own citizens, it is now
held that such a tax may be properly assessed and collected when
the specific and individual items of property so used (railway
cars) were not continuously the same, but were constantly changing
according to the exigencies of the business, and that the tax may
be fixed by an appraisement and valuation of the average amount of
the property thus habitually used and employed, and that the fact
that such cars were employed as vehicles of transportation in the
interchange of interstate commerce would not render their taxation
Invalid.
In March, 1896, the American Refrigerator Transit Company, a
corporation organized under laws of the State of Illinois, filed in
the District Court of Arapahoe County, State of Colorado, against
Frank Hall, treasurer of said county, a bill of complaint, seeking
to restrain the defendant from enforcing payment by the said
transit company of certain taxes assessed upon refrigerator cars
owned by the company and used for the transportation of perishable
freight over various lines of railroad throughout the United
States. The bill alleged that the business in which said cars were
engaged was exclusively interstate commerce business, that the
company has, and has had, no office of place of business within the
State of Colorado, and that all the freight transported in
plaintiff's cars was transported either from a point or points in a
state outside of the State of Colorado to a point within that state
or from a point in the State of Colorado to a point without said
state, or between points wholly outside of said state; that said
cars had no taxable situs within said state; that said assessment
of taxes upon said cars was without authority of
Page 174 U. S. 71
law and void, and that complainant had no plain or adequate
remedy a law.
A demurrer to the complaint was overruled, and answer was filed
denying some, and admitting other, allegations of the bill. At the
trial, the parties agreed to and filed the following
stipulation:
"1st That plaintiff is, and was during the times mentioned in
the petition, a corporation duly organized and existing by virtue
of the laws of the State of Illinois, with its principal office in
the City of East St. Louis, in said state; that it is engaged in
the business of furnishing refrigerator cars for the transportation
of perishable products over the various lines of railroads in the
United States; that these cars are more expensive than the ordinary
box or freight car; that the cars referred to are the sole and
exclusive property of the plaintiff, and that the plaintiff
furnishes the same to be run indiscriminately over any lines of
railroad over which shippers or said railroads may desire to route
them in shipping, and furnishes the same for transportation of
perishable freight upon the direct request of shippers, or of
railroad companies requesting the same on behalf of shippers, but
on the responsibility of the carrier, and not of the shipper; that,
as compensation for the use of its cars, plaintiff received a
mileage of three-fourths of a cent per mile run from each railroad
company over whose lines said cars are run, such rate of payment
being the same as is paid by all railroad companies to each other
for the use of the ordinary freight cars of each when used on the
lines of others in the exchange of cars incident to through
transportation of freight over connecting lines of railroads; that
plaintiff has not, and never has had, any contract of any kind
whatsoever by which its cars are leased or allotted to, or by which
it agrees to furnish its cars to, any railroad company operating
within the State of Colorado; that it has and has had during said
times no office or place of business, nor other property than its
cars, within the State of Colorado, and that all the freight
transported in plaintiff's cars in or through the State of
Colorado, including the cars assessed, was transported in such cars
either from a point or points in a State of the United
Page 174 U. S. 72
States outside of the State of Colorado to a point in the State
of Colorado, or from a point in the State of Colorado to a point
outside of said state, or between points wholly outside of said
State of Colorado, and said cars never were run in said state in
fixed numbers, nor at regular times, nor as a regular part of
particular trains, nor were any certain cars ever in the State of
Colorado except as engaged in such business aforesaid, and then
only transiently present in said state for such purposes."
"That owing to the varying and irregular demand for such cars,
the various railroad companies within the State of Colorado have
not deemed it a profitable investment to build or own cars of such
character , and therefore relied upon securing such cars, when
needed, from the plaintiff or corporations doing a like
business."
"That it is necessary for the railroad companies operating
within the State of Colorado, and which are required to carry over
their lines perishable freight such as fruits, meats, and the like,
to have such character of cars, wherein they can safely transport
such character of freight."
"2d. That the average number of cars of the plaintiff used in
the course of the business aforesaid within the State of Colorado
during the year for which such assessment was made would equal
forty, and that the cash value of plaintiff's cars exceeds the sum
of $250 per car, and that, if such property of the plaintiff is
assessable and taxable within such State of Colorado, then the
amount for which such cars, the property of the plaintiff, is
assessed by said state board of equalization is just and
reasonable, and not in excess of the value placed upon other like
property within said state for the purposes of taxation."
"3d. That said company is not doing business in this state
except as shown in this stipulation and by the facts admitted in
the pleadings."
"4th. That in case it be found by the court, under the
undisputed facts set forth in the pleadings and the facts herein
stipulated, that the authorities of the State of Colorado, under
existing laws, have no power to assess or tax the said property of
plaintiff, then judgment shall be entered herein for the
Page 174 U. S. 73
plaintiff for the relief prayed; otherwise, judgment shall be
entered for the defendants."
"The following constitutional and statutory provisions are
referred to in the opinion:"
" All corporations in this state, or doing business therein,
shall be subject to taxation for state, county, school, municipal,
and other purposes, on the real and personal property owned or used
by them within the territorial limits of the authority levying the
tax."
"(§ 10, art. 10, state const.)"
" SEC. 3765 (M.A.S.). All property, both real and personal,
within the state, not expressly exempt by law, shall be subject to
taxation. . . ."
" SEC. 3804. . . . It shall be the duty of said board [the board
of equalization] to assess all the property in this state owned,
used or controlled by railway companies, telegraph, telephone and
sleeping or palace car companies."
" SEC. 3805. The president, vice-president, general
superintendent, auditor, tax agent, or some other officer of such
railway, sleeping or other palace car, or telegraph or telephone
company, or corporation owning, operating, controlling, or having
in its possession in this state any property shall furnish said
board on or before the fifteenth day of March, in each year, a
statement signed and sworn to by one of such officers, and showing
in detail for the year ending on he thirty-first day of December
preceding:"
"5th. A full list of rolling stock belonging to or operated by
such railway company, setting forth the number, class and value of
all locomotives, passenger cars, sleeping cars or other palace
cars, express cars, baggage cars, mail cars, box cars, cattle cars,
coal cars, platform cars, and all other kinds of cars owned or used
by said company. The statement shall show the actual proportion of
the rolling stock in use on the company's road, all of which is
necessary for the transportation of freight and passengers, and the
operation of the road within the state during the year for which
the statement is made. The said statement shall also show the
actual proportion of rolling stock of said company used upon leased
lines and lines operated with others within the
Page 174 U. S. 74
state, the mileage so leased and operated and the location
thereof. . . ."
"7th. . . . Whenever it shall be found that one corporation uses
or controls any property belonging to or owned by another
corporation, said board may assess such property either to the
corporation using or controlling the same, or to the corporation by
which it is owned or to which it belongs. But every such
corporation shall, in the statement to said board, set forth what
property belonging to or owned by any other corporation is used or
controlled by the corporation making the statement."
The cause having come on to be heard, judgment was entered on
behalf of the plaintiff, awarding a perpetual injunction as prayed
for in the bill of complaint. Thereupon an appeal was taken to the
supreme court of the state, from whose decision, reversing the
judgment of the trial court and directing the dismissal of the
bill, an appeal was taken to this Court.
MR. JUSTICE SHIRAS, after stating the facts in the foregoing
language, delivered the opinion of the court.
In this record we again meet the problem, so often presented,
how to reconcile the rightful power of a state to tax property
within its borders with its duty to obey those provisions of the
federal constitution which forbid the taking of property without
due process of law, and the imposition of burdens upon interstate
commerce.
The frequency with which the question has arisen is evidence
both of its importance and of its difficulty. The vast increase of
commerce throughout the country, and the consequent necessary
increase of the means whereby such commerce is carried on, have
been the occasion of many of the cases in which this Court has been
called upon to consider the
Page 174 U. S. 75
subject. The expense involved in the manufacture of some of the
common articles in daily use and in their transportation is so
great as to be beyond the means of individuals, and has rendered
necessary the aggregation of capital in the form of corporations.
Usually such corporations, though organized under the law of one
state, make their profits by doing their business in several or all
of the states, and, while so doing, receive the protection of their
laws. When the taxpayers of one state perceive that they are
subjected to competition by the importation of articles made in
another, or that they are contributing continually to the
prosperity of foreign corporations, what more natural than that
they should demand that some share of the public burdens should be
put upon such corporations? The difficult task of the lawmaker is
to meet that natural and proper demand without infringing upon the
freedom of interstate commerce or depriving those engaged therein
of the equal protection of the laws.
In the case before us, we do not need to go far in search of the
principles which determine it. We think they may be found in the
cases of
Western Union Tel. Co. v. Massachusetts,
125 U. S. 530;
Pullman's Palace Car Co. v. Pennsylvania, 141 U. S.
18, and
Adams Express Co. v. Ohio, 165 U.
S. 194.
In the first of those cases was involved the question of the
validity of a law of Massachusetts which imposed on the Western
Union Telegraph Company, a corporation of the State of New York, a
tax on account of the property owned and used by it within the
State of Massachusetts, the value of which was to be ascertained by
comparing the length of its lines in that state with the length of
its entire lines. This Court held that such a tax is essentially an
excise tax, and not forbidden by the commerce clause of the
constitution.
In
Pullman's Palace Car Co. v. Pennsylvania, the nature
of the case and the conclusion were thus stated by MR. JUSTICE
GRAY:
"The cars of this company within the State of Pennsylvania are
employed in interstate commerce, but their being so employed does
not exempt them from taxation by the state, and the state has not
taxed them because of their being so
Page 174 U. S. 76
employed, but because of their being within its territory and
jurisdiction. The cars were continuously and permanently employed
in going to and fro upon certain routes of travel. If they had
never passed beyond the limits of Pennsylvania, it could not be
doubted that the state could tax them, like other property within
its borders, notwithstanding they were employed in interstate
commerce. The fact that, instead of stopping at the state boundary,
they cross that boundary in going out and coming back cannot affect
the power of the state to levy a tax upon them. The state, having
the right, for the purposes of taxation, to tax any personal
property found within its jurisdiction without regard to the place
of the owner's domicile, could tax the specific cars which at a
given moment were within its borders. The route over which the cars
travel extending beyond the limits of the state, particular cars
may not remain within the state, but the company has at all times
substantially the same number of cars within the state, and
continuously and constantly uses there a portion of its property,
and it is distinctly found as matter of fact that the company
continuously, throughout the periods for which these taxes were
levied, carried on business in Pennsylvania and had about one
hundred cars within the state."
"The mode which the State of Pennsylvania adopted to ascertain
the proportion of the company's property upon which it should be
taxed in that state was by taking as a basis of assessment such
proportion of the capital stock of the company as the number of
miles over which it ran its cars within the state bore to the whole
number of miles in that and other states over which its cars were
run. This was a just and equitable method of assessment, and if it
were adopted by all the states through which these cars ran, the
company would be assessed upon the whole of its capital stock and
no more."
Adams Express Co. v. Ohio was a case wherein was drawn
in question the validity of a law of the State of Ohio imposing an
assessment upon an express company whose business was carried on
through several states. The statute required a board of
assessors
"to proceed to ascertain and assess the value
Page 174 U. S. 77
of the property of express, telegraph and telephone companies in
Ohio, and in determining the value of the property of said
companies in this state to be taxed within the state and assessed
as herein provided, said board shall be guided by the value of said
property as determined by the value of the entire capital stock of
said companies, and such other evidence and rules as will enable
said board to arrive at the true value in money of the entire
property of said companies within the State of Ohio in the
proportion which the same bears to the entire property of said
companies, as determined by the value of the capital stock thereof,
and the other evidence and rules as aforesaid."
It was contended on behalf of the express company that the law
in question was invalid because it sought to impose taxes on
property beyond the territorial jurisdiction of Ohio, because the
assessments therein provided for were an invasion of the
constitutional guaranty of the equal protection of the laws, and
because the assessments imposed a burden upon interstate commerce.
But this Court held otherwise. Portions of the opinion of MR. CHIEF
JUSTICE FULLER may be appropriately quoted:
"Although the transportation of the subjects of interstate
commerce, or the receipts received therefrom, or the occupation or
business of carrying it on, cannot be directly subjected to state
taxation, yet property belonging to corporations or companies
engaged in such commerce may be, and whatever the particular form
of the exaction, if it is essentially only property taxation, it
will not be considered as falling within the inhibition of the
Constitution. Corporations and companies engaged in interstate
commerce should bear their proper proportion of the burdens of the
governments under whose protection they conduct their operations,
and taxation on property, collectible by the ordinary means, does
not affect interstate commerce, otherwise than incidentally, as all
business is affected by the necessity of contributing to the
support of government."
"As to railroad, telegraph, and sleeping car companies engaged
in interstate commerce, it has been often held by this Court that
their property in the several states through which
Page 174 U. S. 78
their lines or business extended might be valued as a unit for
the purposes of taxation, taking into consideration the uses to
which it was put, and all the elements making up aggregate value,
and that a proportion of the whole fairly and properly ascertained
might be taxed by the particular state without violating any
federal restriction."
"The valuation was thus not confined to the wires, poles, and
instruments of the telegraph company, or the roadbed, ties, rails,
and spikes of the railroad company, or the cars of the sleeping car
company, but included the proportionate part of the value resulting
from the combination of the means by which the business was carried
on -- a value existing to an appreciable extent throughout the
entire domain of operation. And it has been decided that a proper
mode of ascertaining the assessable value of so much of the whole
property as is situated in a particular state is, in the case of
railroads, to take that part of the value of the entire road which
is measured by the proportion of its length therein to the length
of the whole,
Pittsburgh Railway Co. v. Backus,
154 U. S.
421, or taking as the basis of assessment such
proportion of the capital stock of a sleeping car company as the
number of miles of railroad over which its cars are run in a
particular state bears to the whole number of miles traversed by
them in that and other states,
Pullman's Palace Car Co. v.
Pennsylvania, 141 U. S. 18, or such a
proportion of the whole value of the capital stock of a telegraph
company as the length of its lines within a state bears to the
length of its lines everywhere, deducting a sum equal to the value
of its real estate and machinery subject to local taxation within
the state.
Western Union Tel. Co. v. Taggart, 163 U. S.
1."
"Doubtless there is a distinction between the property of
railroad and telegraph companies and that of express companies. The
physical unity existing in the former is lacking in the latter, but
there is the same unity in the use of the entire property for the
specific purpose, and there are the same elements of value arising
from such use. The cars of the Pullman Company did not constitute a
physical unity, and their value as separate cars did not bear a
direct relation to
Page 174 U. S. 79
the valuation which was sustained in that case. The cars were
moved by railway carriers under contract, and the taxation of the
corporation in Pennsylvania was sustained on the theory that the
whole property of the company might be regarded as a unit plant,
with a unit value, a proportionate part of which value might be
reached by the state authorities on the basis indicated."
On a petition for a rehearing, the questions were again fully
argued, and the conclusions reached on the first hearing were
reaffirmed.
Adams Express Co. v. Ohio, 166 U.
S. 185. From the opinion denying the rehearing,
delivered by MR. JUSTICE BREWER, a few extracts may be quoted as
applicable to the case in hand:
"Where is the situs of this intangible property? The Adams
Express Company has, according to its showing, in round numbers,
$4,000,000 of tangible property scattered through different states,
and with that tangible property thus scattered transacts its
business. By the business which it transacts, by combining into a
single use all these separate pieces and articles of tangible
property, by the contracts, franchises, and privileges which it has
acquired and possesses, it has created a corporate property of the
actual value of $16,000,000. Thus, according to its figures -- this
intangible property, its franchises, privileges, etc. -- is of the
value of $12,000,000, and its tangible property of only $4,000,000.
Where is the situs of this intangible property? Is it simply where
its home office is, where is found the central directing thought
which controls the workings of the great machine, or in the state
which gave it its corporate franchise, or is that intangible
property distributed wherever its tangible property is located and
its work done? Clearly, as we think, the latter. Every state within
which it is transacting business and where it has its property,
more or less, may rightfully say that the $16,000,000 of value
which it possesses springs, not merely from the original grant of
corporate power by the state which incorporated it, or from the
mere ownership of the tangible property, but it springs from the
fact that that tangible property it has combined with contracts,
franchises
Page 174 U. S. 80
and privileges into a single unit of property, and this state
contributes to that aggregate value not merely the separate value
of such tangible property as is within its limits, but its
proportionate share of the value of the entire property. That this
is true is obvious from the result that would follow if all the
states other than the one which created the corporation could and
should withhold from it the right to transact express business
within their limits. It might continue to own all its tangible
property within each of those states, but, unable to transact the
express business within their limits, that $12,000,000 of value
attributable to its intangible property would shrivel to a mere
trifle. . . . In conclusion, let us say that this is eminently a
practical age; that courts must recognize things as they are, and
as possessing a value which is accorded to them in the markets of
the world, and that no finespun theories about situs should
interfere to enable these large corporations, whose business is
carried on through many states, to escape from bearing in each
state such burden of taxation as a fair distribution of the actual
value of their property among those states requires."
The Constitution of the State of Colorado provides that all
corporations in the state or doing business therein shall be
subject to taxation on the real and personal property owned or used
by them within the territorial limits of the authority levying the
tax, and its statutes provide for a board of equalization, whose
duty it shall be to assess all the property in the state owned,
used, or controlled by railway companies, telegraph, telephone, and
sleeping or palace car companies, and that, whenever it shall be
found that one corporation uses or controls any property belonging
to or owned by another corporation, said board may assess such
property either to the corporation using or controlling the same,
or to the corporation to which it belongs.
The American Refrigerator Transit Company is a corporation of
the State of Illinois, engaged in the business of furnishing
refrigerator cars for the transportation of perishable products
over the various lines of railroads in the United States, and
receives as compensation for he use of its cars a
Page 174 U. S. 81
mileage of three-fourths of a cent per mile from each railroad
company over whose lines said cars are run.
The receiver of the Union Pacific, Denver and Gulf Company
reported to the board of equalization that he had on the line of
the railroad which he was operating within the State of Colorado
forty-two refrigerator cars belonging to the American Refrigerator
Transit Company on December 31, 1894. The board thereupon assessed
to the transit company said forty-two cars at a valuation of two
hundred and fifty dollars each, and distributed said assessment to
the different counties through which the line of said railroad
extended.
It was stipulated in the trial court
"that it is necessary for the railroad companies operating
within the State of Colorado, and which are required to carry over
their lines perishable freight, to have such character of cars
wherein they can safely transport such freight, and that, owing to
the varying and irregular demands for such cars, the various
railroad companies within the State of Colorado have not deemed it
profitable to build or own cars of such character, and therefore
rely upon securing such cars when needed from the transit company,
or corporations doing a like business."
It was further stipulated
"that the average number of cars of the plaintiff used in the
course of the business aforesaid within the State of Colorado
during the year for which such assessment was made would equal
forty, and that the cash value of plaintiff's cars exceeds the sum
of two hundred and fifty dollars per car, and that, if such
property of the plaintiff is assessable and taxable within such
state, then the amount for which such cars, the property of the
plaintiff, is assessed by said state board of equalization is just
and reasonable, and not in excess of the value placed upon other
like property within said state for the purposes of taxation."
Applying the reasoning and conclusions of the cases hereinbefore
cited to those admitted facts, we have no difficulty in affirming
the judgment of the Supreme Court of Colorado sustaining the
validity of the taxation in question.
The state statutes impose no burdens on the business of the
plaintiff in error, but contemplate only the assessment and
Page 174 U. S. 82
levy of taxes upon the property situated within the state, and
the only question is whether it was competent to ascertain the
number of the cars to be subjected to taxation by inquiring into
the average number used within the state limits during the period
for which the assessment was made.
It having been settled, as we have seen, that where a
corporation of one state brings into another, to use and employ, a
portion of its movable personal property, it is legitimate for the
latter to impose upon such property thus used and employed its fair
share of the burdens of taxation imposed upon similar property used
in like way by its own citizens, we think that such a tax may be
properly assessed and collected, in cases like the present, where
the specific and individual items of property so used and employed
were not continuously the same, but were constantly changing,
according to the exigencies of the business, and that the tax may
be fixed by an appraisement and valuation of the average amount of
the property thus habitually used and employed. Nor would the fact
that such cars were employed as vehicles of transportation in the
interchange of interstate commerce render their taxation invalid.
Marye v. Baltimore & Ohio Railroad, 127
U. S. 123;
Pullman's Palace Car Co. v.
Pennsylvania, 141 U. S. 18.
The judgment of the Supreme Court of the State of Colorado is
accordingly
Affirmed.
MR. JUSTICE HARLAN and MR. JUSTICE WHITE dissented.
